Topic: Poloniex's taking money from its customers to cover its loss - page 8. (Read 2575 times)

The 11,250 figure is based on the losses and how much was taken from your lending balance. The actual figure could be higher, but probably not lower, depending on mainly if they covered some of the losses.

On May 26, Poloniex suffered major losses. On June 14, Poloniex socialized these losses on lenders of BTC at the time. I can't say with authority why there was the long delay, or what happened in the meantime. I would speculate on May 26, Poloniex took over the loan clam positions from those with negative equity and held the position for three weeks. I think they were hoping the price would increase enough so they could offload the position either over time, or in an OTC trade at a high enough price so all loans could be repaid. Poloniex could have continued renewing BTC based loans to cover the short BTC position, and so lenders would not start withdrawing to other lending platforms. Once they saw the price of clam was not going to quickly go back up, they imposed losses on btc lenders.

If you did not have a BTC loan open as of May 26, you may have a valid cause of action. The reasoning for this is simple, you should not have to cover losses for loans that you did not have open at the time of the loss.

If some lenders were able to withdraw their coin from poloniex, and the percentage of your coins taken to cover the losses was higher because of this, you may have a valid cause of action for only your additional losses. This would not apply if Poloniex seized other assets from these accounts that withdrew to cover their portion of the losses based on their btc loans outstanding as of May 26.

Poloniex has customers all over the world, if those who defaulted were in Russia or Lebanon, they will need more than luck...

Good catch. I didn't even notice the dates.

They may have overestimated their ability to convince defaulted borrowers to pay up. A few poor saps probably deposited coins, but they probably switched gears once they realized the loss won't be recovered. This seems to be the extent of their legal threats to borrowers now:


Good luck with that, Poloniex.

Yes, I was there too. Nowadays, I've lost 16% and it will take me many months to get them back. On other platforms, of course...

Nobody has talked about it, but one thing is strange:

Clam's crypto-crash was on May the 26th, but Poloniex took money from its customers on June the 6th. For 10 days, they had covered the loss. And I didn't even knew that the Clam crypto-crap had crashed. Then, suddenly, Poloniex changed its mind, and decided to make their customers pay.

That number represents total loans across the platform, which is quite different from Clam trading volume. It is calculated by working backwards from the 16% and BTC1800 haircut.



Good times. I remember getting 1% daily as well for a short while. 

11,250 btc?
Source, please. It sounds crazy that such a minor crypto was so heavily traded...

But I think we've talked enough about what happened on May the 26th. What needs to be explained is what happened on Friday the 14th of June. I've described what happened to me on post #23, just above.

Reading this belatedly and just only now recalling that I used to loan out quite heavily on Poloniex in early and mid 2017. Didn't know it at the time, but my BTC was snapped up at really big interest rates (if I recall some even almost 1% daily) because of the huge FOMO going on especially in the alt markets. I made some really good profit just loaning out 10-30 day term loans. Had no idea I was exposing myself to "socialised losses".

The risks we take. As if leaving our funds on exchanges aren't enough risks. Glad I gave up doing that. Can't bear thinking of what happens if someone decides I should share their loss...

Polo likes to socialize losses

https://bitcointalksearch.org/topic/btc-stolen-from-poloniex-499580

No I have never been affiliated with Poloniex, and after this incident I probably wouldn’t be interested in working for them if an opportunity presented itself.

I have an account with Poloniex that has dust amounts due to not closing out entire positions when trading and I have lent on Poloniex among other exchanges in the past.

Based on the available public information, Poloniex is claiming there were 11,250 btc, approximately in outstanding margin loans on the day of the flash crash. They are claiming that some positions were force liquidated and upon liquidation, after bringing account balances down to zero, there remains a deficit of 1800 btc that cannot be repaid. They have not said this, but I presume they kept these margin loans outstanding so lenders could not withdraw coin that should be deducted from their balance.

It is a well known risk that margin loans may not be repaid in full. This risk is disclosed in the TOS of any exchange that offers margin loans. Most exchanges will cover margin losses in order to maintain confidence in their lending markets, that will lead to higher liquidity and trading volumes. In this case, Poloniex probably decided the cost of covering the losses exceeded the additional revenue that continued margin lending will lead to.

Not everyone who had a margin loan outstanding at the time defaulted nor has negative equity, for example a customer who borrowed btc to bet on ETH going up presumably can repay their margin loan as agreed. Instead of deducting the balance from specific lenders whose loans defaulted, Poloniex socialized losses among all btc lenders. It is unclear to me if this specific action is legal and in accordance with their TOS, but I also understand why they would want to be this,  and I would presume they obtained legal counsel to advise them the legality of this action.

Are you working for Poloniex?

Actually, I'm still getting the facts, and I have yet to understand how Poloniex took money from its clients.

I'm a victim here, my money was lent at Poloniex. It was not sitting waiting for an offer, it was lent. On Friday, the sum of money I had lent has been reduced by 16%. But the loans I had were still running. And that money, it was used by people doing some margin trading. So, those people doing margin trading at the time, have they experienced a 16% reduction of their trades?

We're talking about 1,800 BTC here. If I look at the daily volume traded at Poloniex, it's very, very substantial.

It is possible there was a higher percentage of clam in margin long positions and serving as collateral. I think most likely, Poloniex initially automatically market sold some margin long positions, stopped this, and sold the remaining clam held in customer accounts in margin long positions via an OTC trade.

Please see this:

Be prepared for a long battle if you seek remedy through the courts. It goes without saying that Gox claimants are still waiting for justice after five years.

I'm getting legal advice, and I've received confirmation that pooling losses is illegal.
The default is 100% due to Poloniex's negligence. If the other trading platforms didn't allow margin trading on CLAM, that's because they were smarter.

Thanks. I see from your calculations that Clam would be treated as having zero value. That would tie in with my equation where 1939 is replaced by 0.

This will likely push interest rates on other lending platforms up as well, given the fact that the market is now given a lot more awareness about how potentially risky their investments are, while they previously thought it was something that was risk free.

I'm surprised that Polo isn't offering to at least compensate in some way, though, given the fault is probably partially on them for offering margin trading on illiquid markets anyways.

I doubt their 'debt recovery' will go that well anyways. It's probably extremely difficult to get anyone, especially people with high amounts invested at the time to pay back their dues, especially when their positions should have automatically closed in the first place.

The change in market cap was 6647 btc. I got this based on 3,625,200 outstanding, a high price of 0.00236825 btc, and a low price of 0.000535 btc. The high market cap was 8585 btc.

The 1800 BTC loss made up 20.96% of clams, if they were bought at the high. In other words, you could spend 1800 btc to buy 20.96% of clams outstanding at the high price. At 2.5x leverage, Poloniex's customers need to have collateral valued at 40% of margin loans outstanding, calculated by x = 1/2.5. 40% of 20.96 is 8.38, so an additional 8.38% of clams outstanding would need to be used as collateral for an 1800 BTC margin loan, bringing the total to 29.34% of clams.

I believe the above is actually how the margin system still works on Poloniex, and this actually results in traders being able to get 3.5x leverage, because they can use 1 BTC to buy 3.5 BTC worth of a position if the collateral is the same as the trading pair. I was able to replicate my mistake in saying that 35% of clams outstanding were used in margin loans plus collateral by incorrectly assuming a total of 2.5x leverage, or borrowing 1.5x the value of the clam collateral, or having equity of 60% of the margin loan.

The 30 minute tick with 444 BTC traded has a low price of 0.00175 BTC, which is at most ~253,000 clam, or ~6.9% of clam outstanding. The following two 30 minute ticks only have about 20 BTC traded in each tick, with a low of 0.00112 BTC, with a maximum traded of about 35.7k clam, or under 1% of clam outstanding.

Most exchanges that offer margin lending would cover losses in these types of situation. There is language in the TOS that says the lenders are taking the risk that borrowers will be unable to repay the margin loans, and lenders may not be repaid the full amount.

The reason exchanges will often cover losses is because if they do not, lenders will not want to use the platform to lend, which will lead to higher interest rates for borrowers, which will lead to lower trading volumes and lower profits for the exchange. I guess Poloniex thought the 1800 btc loss was not enough to justify keeping confidence in their lending platform. If they had the money, they could have bought the clam, and sold it over time at a higher price, and prevented the market from dumping from all the margin liquidations. I expect most lenders to stop using Poloniex to lend out their coins.

How are you calculating the 35%? Based on your assumptions, I'm doing: -1800 = (1939/8585)x - (2.5/3.5)x, which gives 3,685 BTC for the longs and collateral, or 43% of all CLAM.


You are right. 444 BTC of volume occurred in the first five minutes, but that only took the price down to 180K sat. There was less than 150 BTC down from there to 53K sat. That's not enough to account for a 1800 BTC loss. At most, it accounts for only 650 BTC.

I can only agree.

Allowing huge margin trading on that Clam sh*tcoin was unprofessional, and now asking their customers to pay for that mistake is even worse. I've started to withdraw my funds... You wonder what's next because I cannot a trust a company where this happens. No investor can. Your coins are not safe at Poloniex.

I'm amazed at how pisspoor Circle's handling of Poloniex has been. They've pretty much done nothing with it. Even if they're only placeholding they should at least make an effort for the existing users.

As for this, they allowed this to happen. They should be picking up the bill. Stuff like this will only speed up its drive into oblivion. In a space filled with utter waste $400 million for this looks like one of the biggest cash bonfires of all.

At the high, the marketcap of Clam was about 8585 BTC, and at the May 25 low, the marketcap fell to about 1939 BTC, or a difference of about 6645 BTC. Poloniex allows for 2.5x margin trading, which means the value of the margin longs, plus the value of the collateral was just under 35% of all Clam outstanding. This is assuming all margin long positions were opened at the high and sold at the low, that margin was maxed out on all positions, and all positions were secured entirely by Clam.

The losses exceed the trading volume of Clam during the flash crash, so it is probably safe to assume not all positions were sold immidiately. If no Clams were sold, and their value was written down to zero, as few as 21% of Clams outsanding could have been in open positions. I would believe that Poloniex sold the open Clams positions they were unable to sell in the open market, probably at a fairly large discount.

Poloniex is the only major exchange Clam trades on, so any major price action would have occured on Poloniex. Overall, the losses are the result of poor risk management on the part of Poloniex. They should not have allowed such a large percentage of coins outstanding to be bought in margin long positions. I also suspect they initially were automatically closing out margin positions in mass before someone pulled the plug to automatic licquidations that probably caused a large portion of the price decline.

I don't think this would have happened on a more professional exchange.